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The Eurozone debt crisis has frayed a lot of nerves, particularly
among Greek politicians, whose country is on the verge of
bankruptcy, and German politicians, who no longer trust Greek
politicians—they'd misrepresented deficits and debt in order to
accede to the Eurozone, and had continued to do so up to
insolvency. For that hair-raising debacle of Northern Europe vs.
Greece, read.... Firewalls In Place, Markets Ready: Greece Can Go
To Heck.

But now another confrontation, far bigger and at the very core of
the Eurozone, is shaping up: France vs. Germany, or rather
François Hollande vs. the German dictate.

President Nicolas Sarkozy, who’d held his nose and
supported the debt-crisis remedies prescribed by German
Chancellor Angela Merkel, is under siege. But his dominant
opponent, socialist Hollande, has come out forcefully against
every paragraph of the German dictate.

He wants to push the ECB to buy sovereign bonds more
aggressively. He wants to institute Eurobonds to spread risks. He
rejects austerity policies and insists on stimulus. And he wants
to renegotiate Merkel’s most recent oeuvre, the fiscal-union
pact. But Germany is unlikely to compromise. Instead, a few
northern Eurozone countries might form a bloc with Germany—a rift
that might tear the Eurozone apart.

Though France squeaked by with a positive GDP in the last
quarter, Sarkozy’s economic record is blemished. The number of
unemployed in December rose by 29,700 from
November and by 152,000 from prior year, to 2.87 million, or 4.27
million if the underemployed are included—the highest since
September 1999. Youth unemployment is 23%. Job offers on the
internet, which had been growing for 21 months straight, dropped
in January. Auto registrations collapsed, down 21% in January year over year.
Renault sold 25% fewer units and Peugeot-Citroen 15%. Layoffs and
factory closures, though politically risky, might be next.
France’s trade deficit of €70 billion was by far its highest ever
(Germany had a record surplus). All-time high fuel prices are
punishing consumers. And Sarkozy, who came to power on a law and
order platform, had to watch burglaries jump by 17% in 2011.

Yet, he wasn't even officially a candidate. Instead, he
crisscrossed France as president, showed up at a nuclear power
plant, chatted with gendarmes, visited a kindergarten ... a
mini-scandal because the kids were waving, unbeknownst to their
parents. And in the middle of the night, he sought out some
homeless people—however that was organized, given the media
presence and security detail.

His speeches spanned topics from dealing with the pressures on
the healthcare system to holding a referendum on whether
unemployment recipients should be allowed to turn down job
offers. And always, he pointed at Germany as the model for how
the French economy should be run.

But Wednesday evening, he sat in front of TF1's cameras and
declared that he would like to keep his job for another five
years. It was a popular show, with 10.7 million viewers, the
highest number for a TV show since DSK had tried to explain away
the sordid allegations of New York.

While none of this helped him against Hollande, it helped him
against number three, Marine Le Pen, president of the right-wing
National Front, who’d outpolled him last summer. Her father,
Jean-Marie le Pen, former president of the FN, keeps making
unhelpful headlines. Today an appeals court condemned him to a three-month suspended
sentence and a fine of €10,000 for "denying crimes against
humanity"—he’d said that the German occupation of France hadn’t
been "particularly inhumane." Hence, Sarkozy’s elimination in the
first round by Marine le Pen appears unlikely. But in the second
round, as things stand now, Hollande is going to clean his clock.

Merkel's nightmare. Her government is deeply worried that
Hollande might actually try to implement his campaign platform
after the election. They also fear that he will clean house at
the finance ministry and other institutions and replace the
people who have honed their skills during the debt crisis with
people who haven’t learned the ropes yet—while the Eurozone is
struggling to remain intact.

So Sarkozy and Merkel appear to have made a pact. In return for
his support for all of her debt-crisis remedies, she
would campaign for him to prevent Hollande from becoming the next
President of France. Nothing brought that out more forcefully
than their glamorous joint interview at the Elysée Palace, where
both lambasted Hollande. Never before had a German chancellor
campaigned so hard on French soil for a French president.
Read.... Merkel’s Desperate Risky Gamble.